A post Christmas present for homeowners
If you’re like most people, by now Christmas 2012 is just a faint haze in the rearview mirror of your life. But whether you know it or not, all homeowners received an after Christmas gift in the form of a little more equity tied up with a nice fat bow.
Everybody in finance and the real estate industry waits for the monthly Standard & Poor’s/Case-Shiller 20 city index of home prices. The report that came out right after Christmas was the strongest since 2006, showing a 4.3 percent increase in residential home prices from September to October of 2012. Even more impressive is that since January, sale prices are up 6.9 percent, which is the largest year to date gain since 2005. These numbers were so good they beat the projected increase for the September to October comparison of 4 percent.
A separate index released the same week by Lender Processing Service, Inc. showed that national home prices were up by 5.2 percent for the year 2012 through October. All of this news is encouraging after there were several previous artificial starts to the real estate recovery, but since spring the market has gained speed and has held on to it. Real estate professionals and economists are optimistic that this is showing a sustained market recovery that appears to really be the turning point this time.
Helping the market along are the continued low interest rates, which are turning some renters into homeowners. With rents steadily going up and fewer rental units available, monthly rental rates are climbing. The monthly average rental rate across the country was $1,044 in October of 2012, which was up 3.7 percent from a year ago. Although banks still have high lending standards with strict appraisals and even stricter income histories for borrowers, they do have money to lend and are promoting home mortgages. In addition, they have been more aggressive at modifying loans and moving potential foreclosaures into sales by approving more short sales.
Also helping fuel the market is a sudden and unexpected low supply of homes available. A combination of homeowners keeping their properties off the market and anemic new home construction are both contributing to record low inventories. Some areas of the country are experiencing multiple offers with properties frequently selling above asking price.
Some of the hardest hit regions in the country analyzed by Case-Shiller show very high increases in selling prices that may be unsustainable going forward with growth rates expected to level off in 2013.
For example, Phoenix, which was 46.2 percent down from the market peak, is now showing a 21.7 percent increase from a year ago. Miami, which was 46.6 percent down from the market peak, is showing an increase from a year ago of 8.5 percent. Detroit, down 37 percent from its market high, is now showing a 10 percent increase from a year ago. And Las Vegas, which was down 57.3 percent from its peak market is showing an 8.4 percent increase from a year earlier.
However, even if the appreciation rates do experience a flattening out, with rents going up and more buyers running after fewer homes, we could still have a very positive outcome for homeowners who are ready to test the waters.
So if Santa didn’t bring you exactly what you wanted on Dec. 25, maybe what Case-Shiller brought you on Dec. 26 has softened the blow. Besides there’s always next year.